[House Report 110-313]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-313

======================================================================
 
               MICROLOAN AMENDMENTS AND MODERNIZATION ACT

                                _______
                                

 September 4, 2007.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Ms. Velazquez, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3020]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Small Business, to whom was referred the 
bill (H.R. 3020) to amend the Small Business Act to improve the 
Microloan program, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
   I. Amendment.......................................................1
  II. Purpose of the Bill and Summary.................................5
 III. Background and Need for Legislation.............................7
  IV. Hearings.......................................................11
   V. Committee Consideration........................................12
  VI. Committee Votes................................................12
 VII. Section-by-Section Analysis of H.R. 3020.......................13
VIII. Congressional Budget Office Cost Estimate......................15
  IX. Committee Estimate of Costs....................................16
   X. Oversight Findings.............................................17
  XI. Statement of Constitutional Authority..........................17
 XII. Compliance With Public Law 104-4...............................17
XIII. Congressional Accountability Act...............................17
 XIV. Federal Advisory Committee Statement...........................17
  XV. Statement of No Earmarks.......................................17
 XVI. Performance Goals and Objectives...............................17
XVII. Changes in Existing Law Made by the Bill, as Reported..........17

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Microloan Amendments 
and Modernization Act''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

                           TITLE I--MICROLOAN

Sec. 101. Transmission of credit reporting information.
Sec. 102. Flexible credit.
Sec. 103. Intermediary eligibility requirements.
Sec. 104. Average loan size.
Sec. 105. Technical assistance.
Sec. 106. Entrepreneurs with disabilities.

                            TITLE II--PRIME

Sec. 201. Short title.
Sec. 202. PRIME.
Sec. 203. Conforming repeal.

                           TITLE I--MICROLOAN

SEC. 101. TRANSMISSION OF CREDIT REPORTING INFORMATION.

  Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended 
by adding at the end the following:
          ``(14) Credit reporting information.--The Administrator shall 
        establish a process, for use by a lender making a loan to a 
        borrower under this subsection, under which the lender provides 
        to the major credit reporting agencies the information about 
        the borrower that is relevant to credit reporting, such as the 
        payment activity of the borrower on the loan.''.

SEC. 102. FLEXIBLE CREDIT.

  Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended, 
in each of paragraphs (1)(B)(i) and (11)(B), by striking ``short-
term,''.

SEC. 103. INTERMEDIARY ELIGIBILITY REQUIREMENTS.

  Section 7(m)(2) of the Small Business Act (15 U.S.C. 636(m)(2)) is 
amended--
          (1) in subparagraph (A) by striking ``paragraph (10)'' and 
        inserting ``paragraph (11)''; and
          (2) by amending subparagraph (B) to read as follows:
                  ``(B) has--
                          ``(i) at least--
                                  ``(I) 1 year of experience making 
                                microloans to startup, newly 
                                established, or growing small business 
                                concerns; or
                                  ``(II) 1 full-time employee who has 
                                not less than 3 years experience making 
                                microloans to startup, newly 
                                established, or growing small business 
                                concerns; and
                          ``(ii) at least 1 year of experience 
                        providing, as an integral part of its microloan 
                        program, intensive marketing, management, and 
                        technical assistance to its borrowers.''.

SEC. 104. AVERAGE LOAN SIZE.

  Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended 
by striking ``$7,500'' and inserting ``$10,000'' in each of the 
following places: paragraph (3)(F)(iii), paragraph (6)(C)(i), and 
paragraph (6)(C)(ii).

SEC. 105. TECHNICAL ASSISTANCE.

  Section 7(m)(4)(E) of the Small Business Act (15 U.S.C. 636(m)(4)(E)) 
is amended as follows:
          (1) Pre-loan.--Clause (i) is amended by striking ``25 
        percent'' and inserting ``35 percent''.
          (2) Third party contracts.--Clause (ii) is amended by 
        striking ``25 percent'' and inserting ``35 percent''.

SEC. 106. ENTREPRENEURS WITH DISABILITIES.

  Section 7(m)(1)(A)(i) of the Small Business Act (15 U.S.C. 
636(m)(1)(A)(i)) is amended by inserting ``disabled,'' before ``and 
minority entrepreneurs''.

                            TITLE II--PRIME

SEC. 201. SHORT TITLE.

  This title may be cited as the ``Program for Investment in 
Microentrepreneurs Act'' or the ``PRIME Act''.

SEC. 202. PRIME.

  The Small Business Act is amended--
          (1) by redesignating section 37 as 99; and
          (2) by inserting after section 36 the following:

``SEC. 37. PRIME PROGRAM.

  ``(a) Definitions.--For purposes of this section, the following 
definitions shall apply:
          ``(1) Capacity building services.--The term `capacity 
        building services' means services provided to an organization 
        that is, or that is in the process of becoming, a 
        microenterprise development organization or program, for the 
        purpose of enhancing its ability to provide training and 
        services to disadvantaged entrepreneurs.
          ``(2) Disadvantaged entrepreneur.--The term `disadvantaged 
        entrepreneur' means a microentrepreneur that is--
                  ``(A) a very low-income person;
                  ``(B) a low-income person; or
                  ``(C) an entrepreneur that lacks adequate access to 
                capital or other resources essential for business 
                success, or is economically disadvantaged, as 
                determined by the Administrator.
          ``(3) Collaborative.--The term `collaborative' means 2 or 
        more nonprofit entities that agree to act jointly as a 
        qualified organization under this section.
          ``(4) Indian tribe.--The term `Indian tribe' means any Indian 
        tribe, band, pueblo, nation, or other organized group or 
        community, including any Alaska Native village or regional or 
        village corporation, as defined in or established pursuant to 
        the Alaska Native Claims Settlement Act, which is recognized as 
        eligible for the special programs and services provided by the 
        United States to Indians because of their status as Indians.
          ``(5) Intermediary.--The term `intermediary' means a private, 
        nonprofit entity that seeks to serve microenterprise 
        development organizations and programs as authorized under 
        subsection (d).
          ``(6) Low-income person.--The term `low-income person' means 
        a person having an income, adjusted for family size, of not 
        more than--
                  ``(A) for metropolitan areas, 80 percent of the area 
                median income; and
                  ``(B) for nonmetropolitan areas, the greater of--
                          ``(i) 80 percent of the area median income; 
                        or
                          ``(ii) 80 percent of the statewide 
                        nonmetropolitan area median income.
          ``(7) Microentrepreneur.--The term `microentrepreneur' means 
        the owner or developer of a microenterprise.
          ``(8) Microenterprise.--The term `microenterprise' means a 
        sole proprietorship, partnership, or corporation that--
                  ``(A) has fewer than 5 employees; and
                  ``(B) generally lacks access to conventional loans, 
                equity, or other banking services.
          ``(9) Microenterprise development organization or program.--
        The term `microenterprise development organization or program' 
        means a nonprofit entity, or a program administered by such an 
        entity, including community development corporations or other 
        nonprofit development organizations and social service 
        organizations, that provides services to disadvantaged 
        entrepreneurs.
          ``(10) Poverty line.--The term `poverty line' means the 
        official poverty line defined by the Office of Management and 
        Budget based on the most recent data available from the Bureau 
        of the Census. The Administrator shall revise annually (or at 
        any shorter interval the Administrator determines to be 
        feasible and desirable) the poverty line. The required revision 
        shall be accomplished by multiplying the official poverty line 
        by the percentage change in the Consumer Price Index for All 
        Urban Consumers during the annual or other interval immediately 
        preceding the time at which the revision is made.
          ``(11) Training and technical assistance.--The term `training 
        and technical assistance' means services and support provided 
        to disadvantaged entrepreneurs, such as assistance for the 
        purpose of enhancing business planning, marketing, management, 
        financial management skills, and assistance for the purpose of 
        accessing financial services.
          ``(12) Very low-income person.--The term `very low-income 
        person' means having an income, adjusted for family size, of 
        not more than 150 percent of the poverty line.
  ``(b) Establishment of Program.--The Administrator shall establish a 
microenterprise technical assistance and capacity building grant 
program to provide assistance from the Administration in the form of 
grants to qualified organizations in accordance with this section.
  ``(c) Uses of Assistance.--A qualified organization shall use grants 
made under this section--
          ``(1) to provide training and technical assistance to 
        disadvantaged entrepreneurs;
          ``(2) to provide training and capacity building services to 
        microenterprise development organizations and programs and 
        groups of such organizations to assist such organizations and 
        programs in developing microenterprise training and services;
          ``(3) to aid in researching and developing the best practices 
        in the field of microenterprise and technical assistance 
        programs for disadvantaged entrepreneurs; and
          ``(4) for such other activities as the Administrator 
        determines are consistent with the purposes of this section.
  ``(d) Qualified Organizations.--For purposes of eligibility for 
assistance under this section, a qualified organization shall be--
          ``(1) a nonprofit microenterprise development organization or 
        program (or a group or collaborative thereof) that has a 
        demonstrated record of delivering microenterprise services to 
        disadvantaged entrepreneurs;
          ``(2) an intermediary;
          ``(3) a microenterprise development organization or program 
        that is accountable to a local community, working in 
        conjunction with a State or local government or Indian tribe; 
        or
          ``(4) an Indian tribe acting on its own, if the Indian tribe 
        can certify that no private organization or program referred to 
        in this paragraph exists within its jurisdiction.
  ``(e) Allocation of Assistance; Subgrants.--
          ``(1) Allocation of assistance.--
                  ``(A) In general.--The Administrator shall allocate 
                assistance from the Administration under this section 
                to ensure that--
                          ``(i) activities described in subsection 
                        (c)(1) are funded using not less than 75 
                        percent of amounts made available for such 
                        assistance; and
                          ``(ii) activities described in subsection 
                        (c)(2) are funded using not less than 15 
                        percent of amounts made available for such 
                        assistance.
                  ``(B) Limit on individual assistance.--No single 
                person may receive more than 10 percent of the total 
                funds appropriated under this section in a single 
                fiscal year.
          ``(2) Targeted assistance.--The Administrator shall ensure 
        that not less than 50 percent of the grants made under this 
        section are used to benefit very low-income persons, including 
        those residing on Indian reservations.
          ``(3) Subgrants authorized.--
                  ``(A) In general.--A qualified organization receiving 
                assistance under this section may provide grants using 
                that assistance to qualified small and emerging 
                microenterprise organizations and programs, subject to 
                such rules and regulations as the Administrator 
                determines to be appropriate.
                  ``(B) Limit on administrative expenses.--Not more 
                than 7.5 percent of assistance received by a qualified 
                organization under this section may be used for 
                administrative expenses in connection with the making 
                of subgrants under subparagraph (A).
          ``(4) Diversity.--In making grants under this section, the 
        Administrator shall ensure that grant recipients include both 
        large and small microenterprise organizations, serving urban, 
        rural, and Indian tribal communities serving diverse 
        populations.
          ``(5) Prohibition on preferential consideration of certain 
        sba program participants.--In making grants under this section, 
        the Administrator shall ensure that any application made by a 
        qualified organization that is a participant in the program 
        established under section 7(m) does not receive preferential 
        consideration over applications from other qualified 
        organizations that are not participants in such program.
  ``(f) Matching Requirements.--
          ``(1) In general.--Financial assistance under this section 
        shall be matched with funds from sources other than the Federal 
        Government on the basis of not less than 50 percent of each 
        dollar provided by the Administration.
          ``(2) Sources of matching funds.--Fees, grants, gifts, funds 
        from loan sources, and in-kind resources of a grant recipient 
        from public or private sources may be used to comply with the 
        matching requirement in paragraph (1).
          ``(3) Exception.--
                  ``(A) In general.--In the case of an applicant for 
                assistance under this section with severe constraints 
                on available sources of matching funds, the 
                Administrator may reduce or eliminate the matching 
                requirement in paragraph (1).
                  ``(B) Limitation.--Not more than 10 percent of the 
                total funds made available from the Administration in 
                any fiscal year to carry out this section may be 
                excepted from the matching requirement in paragraph 
                (1), as authorized by subparagraph (A).
  ``(g) Applications for Assistance.--An application for assistance 
under this section shall be submitted in such form and in accordance 
with such procedures as the Administrator shall establish.
  ``(h) Recordkeeping.--
          ``(1) In general.--A qualified organization receiving 
        assistance from the Administration under this section shall 
        keep such records, for such periods as may be prescribed by the 
        Administrator and necessary to disclose the manner in which any 
        assistance under this section is used and to demonstrate 
        compliance with the requirements of this section.
          ``(2) User profile information.--The Administrator shall 
        require each qualified organization receiving assistance from 
        the Administration under this section to compile such data, as 
        is determined to be appropriate by the Administrator, on the 
        gender, race, ethnicity, national origin, or other pertinent 
        information concerning individuals that utilize the services of 
        the assisted organization to ensure that targeted populations 
        and low-income residents of investment areas are adequately 
        served.
          ``(3) Access to records.--The Administrator shall have access 
        on demand, for the purpose of determining compliance with this 
        section, to any records of a qualified organization that 
        receives assistance from the Administration under this section.
          ``(4) Review.--Not less than annually, the Administrator 
        shall review the progress of each assisted organization in 
        carrying out its strategic plan, meeting its performance goals, 
        and satisfying the terms and conditions of its assistance 
        agreement.
          ``(5) Reporting.--
                  ``(A) Annual reports.--The Administrator shall 
                require each qualified organization receiving 
                assistance from the Administration under this section 
                to submit an annual report to the Administrator on its 
                activities, its financial condition, and its success in 
                meeting performance goals, in satisfying the terms and 
                conditions of its assistance agreement, and in 
                complying with other requirements of this section, in 
                such form and manner as the Administrator shall 
                specify.
                  ``(B) Availability of reports.--The Administrator, 
                after deleting or redacting any material as appropriate 
                to protect privacy or proprietary interests, shall make 
                such reports submitted under subparagraph (A) available 
                for public inspection.
  ``(i) Implementation.--The Administrator shall, by regulation, 
establish such requirements as may be necessary to carry out this 
section.''.

SEC. 203. CONFORMING REPEAL.

  Subtitle C (15 U.S.C. 6901 et seq.) of title I of the Riegle 
Community Development and Regulatory Improvement Act of 1994 is 
repealed.

                        II. Purpose and Summary

    The purpose of H.R. 3020, The Microloan Amendments and 
Modernization Act (MAMA) is to encourage participation in the 
microloan program by qualified intermediaries (technical 
assistance providers and lenders) and aspiring entrepreneurs. 
The bill must provide new tools while modernizing old ones so 
that the program is better able to inform, educate and assist 
early stage small businesses to start up, grow, and create 
jobs. H.R. 3020 amends the program for the first time in eight 
years and responds to observations about barriers to 
participation indicated to the Committee by intermediaries/
lenders, business participants and academics who have studied 
the program. The Small Business Administration (SBA), which 
operates the program, is directed to help in this effort and to 
work with the intermediaries to find a way to report the 
repayment records of borrowers to major credit agencies and 
expand their capital access options. In addition, the Committee 
wants to move the Program for Investment in MicroEnterprise 
(PRIME) into the Small Business Act merging the program's 
authorization with most of the other programs run by the SBA.
    To accomplish these purposes, H.R. 3020 encourages 
increased borrower participation in a number of ways that help 
aspiring entrepreneurs who might not qualify for credit under 
other programs by allowing them greater benefit from the unique 
microloan process. Also, it helps them by modernizing some of 
microloan's provisions to reflect the realities of lending to 
early stage small businesses in today's economy. First, the 
bill would make changes to the terms that can be offered on 
loans to allow more flexibility. The current statute requires 
intermediary lenders to offer only ``short-term'' loans. 
However, longer-term loans or revolving credit allowed by the 
bill would permit microbusiness participants to have greater 
latitude in managing their debt obligations, potentially 
increasing their profitability. The taxpayers' interests are 
still protected because the lender takes the first loss if the 
loan fails. In addition, disabled borrowers will be 
specifically identified as an intended beneficiary of 
microloans in the ``purpose'' section of the statute, in the 
same manner as current law recognizes women business owners, 
minority business owners and other deserving groups. Finally, 
SBA is directed to help ensure that repayment histories of the 
program's borrowers are duly reported. Creating a reporting 
mechanism, with the help of the SBA as directed by this bill, 
would enhance the credit score of microloan participants, 
permitting them to broaden their access to low-cost financing 
thus spurring the opportunity for continued growth using 
traditional capital sources.
    H.R. 3020 promotes greater intermediary participation. It 
modernizes the statutory ceiling on the ``average loan size'' 
so more intermediaries can qualify for the most favorable 
interest rate (2 percent below federal borrowing rate on 5-year 
Treasury notes) raising it to $10,000, the first raise since 
the program's inception. The bill also will help to increase 
the number of intermediaries that can meet the qualifications 
to participate in the microloan program. H.R. 3020 sets out the 
kind of equivalent lending and counseling experience that would 
allow a well-trained employee to help a new non-profit 
participant qualify as an intermediary.
    In addition, existing restrictions on the use of technical 
assistance funds are burdensome and can hurt an intermediary's 
ability to deliver appropriate services to potential borrowers. 
The bill raises the amount of the technical assistance grant 
that can be used for this ``pre-loan'' assistance to 35 percent 
from its current level of 25 percent. Similarly in certain 
cases for start up businesses, outside training is absolutely 
necessary to ensure that the borrower is completely prepared to 
open a business. To cover this kind of contingency, the bill 
raises the amount of the technical assistance grant used for 
contracted assistance to 35 percent from 25 percent.
    Finally, H.R. 3020 moves the entire PRIME initiative into 
the Small Business Act. The move should have no direct impact 
on the operation of the program which is already administered 
by the SBA, but it does clarify that the SBA has authority to 
administer the PRIME program. Consolidating the elements of 
microenterprise assistance programs in one place and makes it 
easier for the Committee to oversee these initiatives in the 
future.

                III. Background and Need for Legislation

    The SBA makes available small loans and technical 
assistance to very small, low-income businesses through the 
SBA's microloan program and technical assistance grants\1\ and 
the PRIME. These initiatives form a significant portion of the 
lending and assistance available to such businesses from any 
source in the United States though private sources for 
microlending are available.\2\ The microloan program targets 
loans to underserved low-income entrepreneurs using non-profit 
intermediaries who also provide the technical assistance. 
Overall, the program has experienced very few defaults from 
intermediary lenders and few defaults from borrowers. This kind 
of lending is necessary because of a gap in affordable capital 
that is available to very small, unproven businesses. Banks do 
not provide credit to individuals unless they have sufficient 
assets to protect the lender's assets. Even SBA's guaranteed 
loan program requires adequate amounts of collateral and a 
reasonable credit score. Other starters of small businesses use 
expensive credit card borrowing to start their businesses. But 
this alternative is not available to certain classes of 
entrepreneurs. For those budding entrepreneurs, the only 
available alternative is frequently a microloan--a small loan 
provided by non-profit institutions. Microlending and technical 
assistance for these businesses has received strong support 
over the years from the business community and Congress which 
has continued to fund the programs despite administration 
proposals to scale back or eliminate them. In fact, as a 
background to the consideration of this bill, the Executive 
Branch has proposed significant changes to the microloan 
program and has once again proposed eliminating the PRIME 
program for FY 2008. Citing redundancy and the cost of 
providing assistance with each loan, the administration 
proposal would fund microloans by increasing the interest paid 
by the intermediaries on federal funds and ultimately paid by 
the small business borrowers. Technical assistance funds would 
be eliminated from both microloan Program and PRIME but 
borrowers or potential borrowers could seek assistance from 
existing economic development partners, as in fact they can 
now, including the Small Business Development Centers (SBDCs), 
Women's Business Centers (WBCs), and SCORE.
---------------------------------------------------------------------------
    \1\ Sec. 7(m) of the Small Business Act; 15 U.S.C. Sec. 636(m)
    \2\ Elaine Edgecomb of the FIELD program at the Aspen Institute 
says there are about 554 microfinance programs in the U.S. of which 230 
are lenders. Directory of U.S. Micro-Enterprise Programs (Field 2002).
---------------------------------------------------------------------------

Microloan program----

    Congress created a microloan program in 1991 by adding 
Sec. 7(m) to the Small Business Act.\3\ The program makes funds 
available to nonprofit, community-based lenders who in turn 
make very small loans to eligible borrowers--mainly higher-
risk, fledgling entrepreneurs, whose businesses generally serve 
their local communities. While the overall set of 
microenterprises numbers in the millions, and one in six 
employees in the United States works for a microenterprise,\4\ 
businesses using the microloan program are different because 
they can not access affordable credit. These borrowers may be 
unable to get a traditional loan due to poor credit scores, no 
credit history, or a lack of business experience. As 
structured, the program reaches various important demographic 
groups that have not traditionally been well-served by the 
private sector lends or even the SBA's 7(a) program. For 
example, microloans have been a source of capital for low-
income women business owners (who receive about 44 percent of 
the loans) and minority borrowers (who receive over 50 percent 
of the loans.) Also, the loans tend to be geographically 
diverse. In the United States, roughly one-third of the 
microloans are made in rural areas.
---------------------------------------------------------------------------
    \3\ P.L. 102-140, approved October 28, 1991 as a Demonstration 
Program. The designation ``demonstration'' was removed by P.L. 105-135 
approved Dec. 2, 1997.
    \4\ See the table compiled by the Office of Advocacy, SBA--http://
www.sba.gov/advo/research/us88_04.pdf. The amount is the total 
employees in firms with fewer than 5 employees plus all firms with 0 
employees.
---------------------------------------------------------------------------
    The mechanics of the program are straightforward. SBA makes 
10-year loans of up to $750,000 to intermediaries who, in turn, 
make very small loans of less than $35,000 for less than 6 
years. If a loan is needed (in some cases a loan may be 
inadvisable) interest rates to the borrower can vary from 8 
percent to 13 percent in the current market. The alternative 
for many businesses at this level is significantly higher 
credit card interest rates, or personal loan rates which 
decrease the chance for survival and growth. The average loan 
for the program is about $13,000 and the funds can be used for 
any business purpose though, due to the small amount, the 
proceeds generally go to the essentials. Most times, additional 
funds are contingent upon the repayment of the previous loan, 
helping a new business to move along one step at a time. Some 
lenders use peer-review with groups of entrepreneurs working 
together to help businesses; others use trained staff even 
supplemented by third parties to help with strategy and 
business planning. Over 98 percent of the loans have been 
repaid, a similar percentage to most commercial institutions 
which lend to businesses with much higher credit scores.\5\ The 
United States microloan intermediaries have loaned to 26,000 
small business owners over the years and created more than 
64,000 jobs since the program started. In 2006, SBA reports 
that micro-loans created or retained about 10,000 jobs and 
leveraged roughly $30 million in loans when the funds 
intermediaries obtain from other sources are included.\6\
---------------------------------------------------------------------------
    \5\ Testimony of Elaine Edgecomb, FIELD Project, The Aspen 
Institute, before the Committee on Small Business, U.S. House of 
Representatives, Washington, DC, June 14, 2007.
    \6\ Testimony of Friends of the SBA Microloan Program, submitted 
for the record to the Committee on Small Business, U.S. House of 
Representatives, Washington, DC, June 14, 2007, p. 1.
---------------------------------------------------------------------------
    Congress and private financial institutions recognized the 
value of this program long ago and its adaptation to our 
economy to help low income communities and borrowers has been a 
strong success. The federal government has supported the 
concept of micro-lending abroad and it contributes millions of 
dollars in foreign aid that is used in international 
microlending programs.\7\ Indeed, in one of its earliest acts 
after the fall of Saddam Hussein, the Coalition Provisional 
Authority set up a $17 million direct micro-loan fund 
specifically available to Iraqi entrepreneurs.\8\
---------------------------------------------------------------------------
    \7\ Debate Stirs Over Tiny Loans for World's Poorest, Cecelia 
Dugger, New York Times, April 29, 2004, pg. 1, ``Over $2 billion 
appropriated by Congress for micro credit programs since 1988''.
    \8\ See Coalition Provision Authority Statement of Services and 
Programs for Economic Development; http://www.cpa_iraq.org/economy/
priv_sect_dvlpt.html.
---------------------------------------------------------------------------

Program for investment in Micro-Entrepreneurs (PRIME)

    The PRIME allows SBA to award grants to non-profit, 
microenterprise development organizations, programs, 
collaborators, or intermediaries. These funds can be used by an 
organization to provide much-needed training and technical 
assistance to low-income and disadvantaged entrepreneurs 
interested in starting or expanding their own businesses. They 
also can be used to engage in capacity building activities 
targeted to micro-enterprise development organizations that 
serve low-income and disadvantaged entrepreneurs. PRIME is 
distinguished from other technical assistance support programs 
because it is not tied to a loan. In solely providing 
entrepreneurial development training programs, PRIME often is 
able to assist low-income small business owners with managing 
their capital needs without taking on unnecessary burdens. This 
function--while often overlooked--is essential to the growth of 
entrepreneurs in low-income communities. By providing marketing 
assistance or business structure and operation advice that 
helps plug the entrepreneur into the community an extended 
source of supporters and advisors are tapped that are available 
to help the business over the long haul.

Addressing the problems in the Microloan program

    H.R. 3020 amends the SBA's microloan program in section 
7(m) to address and correct problems that the Committee has 
identified as creating barriers to the participation of 
borrowers, potential borrowers and intermediaries. In addition, 
it modernizes some of its provisions to reflect what the 
Committee found were the realities of lending to early stage 
small businesses in today's economy. It also moves the PRIME 
program into the Small Business Act to allow for stronger, 
direct administration.
    Credit Reporting.--The SBA is directed to help ensure that 
repayment histories are duly reported. Under the current 
system, if a borrower successfully repays an SBA microloan, as 
the vast majority do, repayment information is oftentimes not 
conveyed to credit reporting agencies. Intermediary lenders 
have too small a volume of loans to qualify for reporting with 
the major reporters. Creating a reporting mechanism, with the 
help of the SBA as directed by this bill, would enhance the 
credit score of microbusiness owners, broadening their access 
to low-cost financing thus spurring continued growth through 
traditional capital sources.
    More Flexible Lending Terms.--H.R. 3020 encourages borrower 
participation by increasing benefits from the unique microloan 
process. The bill makes changes to the terms that can be 
offered on loans to allow more flexibility. Intermediary 
lenders must offer ``short-term'' loans under the current 
program structure, even though more flexibility for longer 
terms or revolving credit loans might better reflect the needs 
of the borrowers and enhance the suitability of their loans. 
Longer-term loans would permit microloan recipients to have 
greater latitude in managing their debt obligations, 
potentially increasing their profitability. Lenders play a 
larger role in adjusting the terms to meet the specific needs 
of the borrower. The taxpayers' interests are still protected 
because the lender will take the first loss if the loan fails.
    Experienced Intermediaries.--To increase the number of 
intermediaries that can demonstrate the expertise necessary to 
participate in the microloan program the bill adjusts 
eligibility requirements. Current requirements to qualify as a 
microloan intermediary are too restrictive and can bar suitable 
participants who have significant, equivalent microlending 
experience. Some areas that could use this kind of program do 
not have qualified intermediaries that know the local markets 
denying businesses the opportunity to participate. In some 
cases, communities that want the program must wait until a non-
profit group can accumulate the experience necessary to 
qualify. The Microloan Amendments and Modernization Act sets 
out the kind of equivalent experience that would allow a well-
trained employee with significant expertise to help a new 
intermediary qualify for the microloan program. Microloan 
programs will be able to start lending more quickly while still 
ensuring that the technical advisers are well-trained.
    Average Loan Size.--One criticism that has been leveled at 
the program is that it is unsustainable. Ultimately, such a 
structure might discourage non-profit groups who would have 
liked to participate because they are simply required to 
struggle too much to keep the program going. For example some 
of the thresholds provided in the law that apply to the money 
the intermediaries get and lend have not been raised since the 
program's inception. Congress set $7500 as the average loan 
size and if an intermediary's average loan was below that 
amount, it could qualify for funds at the most favorable rate 
(currently 2% under the 5 year Treasury Bill rate). Raising 
these thresholds to $10,000 helps keep the cost of borrowing 
low for intermediaries and provides a level that encourages 
greater intermediary (lender) participation. The program is 
more reasonable and useful to them. The higher threshold 
reflects inflation as well as the growing capital needs of even 
low income microbusinesses, and answers a common complaint from 
the microlending community.
    Expanded Use for Technical Assistance Grants.--Existing 
restrictions on the use of technical assistance funds are 
burdensome and can hurt an intermediary's ability to deliver 
appropriate services to potential borrowers. For example, 
intermediaries are not allowed to use as much of the funds as 
they need to work with potential borrowers who may ultimately 
be advised that they do not need a loan. In some circumstances 
only one loan is made for every 10 aspiring business owners who 
receive counseling. Such assistance is still considered 
valuable to ensure that an entrepreneur is not encouraged to 
take on debt that is unnecessary. The bill raises the amount of 
the technical assistance grant that can be used for this ``pre-
loan'' assistance to 35 percent. Similarly, the limits on grant 
funds used to hire third party contractors that provide 
specialized technical assistance to borrowers have also proved 
too restrictive. There are cases where outside training is 
absolutely necessary to ensure that the borrower is completely 
prepared to open a business; this can include licensing 
requirements or information about local environment or zoning 
restrictions. To cover this kind of contingency, the bill 
raises the amount of the technical assistance grant that can be 
used for contracted assistance to 35 percent. Setting these 
percentages at a reasonable level encourages participation of 
good intermediaries and ensures that businesses get the advice 
they need.
    Entrepreneurs With Disabilities.--Current law lists a host 
of purposes for the microloan program. Though it is not an 
exclusive list it does guide the operation of the program. The 
list includes women, low-income, veteran and minority business 
owners specifically. H.R. 3020 adds disabled entrepreneurs to 
this category. The program's participants have identified the 
disabled as a group that can use more of this type of 
assistance and the microloan system is one tool that can 
provide them with self-employment as an option for their 
financial independence.
    PRIME Incorporated Into the Small Business Act.--Finally, 
Title II of the Microloan Amendments and Modernization Act 
moves the entire PRIME into the Small Business Act. This simply 
removes the PRIME from its current location isolated in the 
United States Code as an adjunct to the Riegle Community 
Development and Regulatory Improvement Act of 1994\9\ and adds 
it as an amendment to the Small Business Act to include its 
provisions. The move should have no direct impact on the 
operation of the program which is already administered by the 
SBA, but it does clarify that the SBA has authority to 
administer the PRIME program. The move consolidates the 
elements of microenterprise assistance programs in one place 
and makes it easier for the Committee to oversee these 
initiatives in the future. The moving of the PRIME Act was done 
in consultation with the Financial Services Committee.
---------------------------------------------------------------------------
    \9\ 15 U.S.C. Section 6901 et seq.
---------------------------------------------------------------------------

                               CONCLUSION

    The Microloan Improvements and Modernization Act provides 
solid improvements to an already strong program for underserved 
but deserving and determined entrepreneurs. It builds on the 
strengths of the existing programs and removes some of the 
small but frustrating barriers that have prevented small 
businesses from fully utilizing these SBA programs. 
Entrepreneurs are given the tools they need to succeed without 
unduly burdening taxpayers.

                              IV. Hearings

    In the 110th Congress, the full Committee on Small Business 
held a hearing on June 14th, 2007 on the challenges facing the 
microloan program. Janet Tasker, the Deputy Associate 
Administrator of the SBA for Capital Access, provided the 
administration's plans for the future of the program and facts 
and data on the program's accomplishments. SBA strongly 
supported the capital access mission of the program but 
outlined plans to reduce the government investment by raising 
the cost of borrowing and eliminating technical assistance 
grants moving the counseling to the SBDC, WBC and SCORE 
programs. Also appearing was Ms. Lisa J. Servon--Associate 
Professor, The New School, New York. She testified that the 
microloan concept is worthy of government support but suggested 
that for its long term sustainability, Congress should be 
thinking of innovative ways to strengthen the program. Daniel 
Betancourt, CEO of Community First Fund in Lancaster, PA and 
Chairman of the Association for Enterprise Opportunity spoke 
about the changes intermediaries want and the differences 
between the 7(a) program and microloan program for lenders (his 
company does both). A borrower testifying was Edward ``Champ'' 
Hall, owner of Champ Hall's Barber Shop and Barber College, 
Lancaster City, PA. After not being able to find any other loan 
funds to start a business, Mr. Hall used microloans to renovate 
and open a barber shop. He received technical assistance under 
the program and was successful enough to open a barber school 
(with a new loan) and employ six people. Finally Elaine 
Edgcomb, Director of the FIELD Study of the Aspen Institute 
testified that the microloan program when analyzed for its 
economic value to the community (rather than just its cost) is 
very reasonable. She argued that the government has a role to 
play in this kind of lending and that job creation, community 
support, and intense technical assistance that trains a good 
business must be taken into account to offset some program 
costs. Testimony was also submitted by the ``Friends of the SBA 
Microloan Program'' in strong support of amending and 
reauthorizing the program.
    On July 12, 2007 the full Committee held a hearing on H.R. 
3020, the Microloan Amendments and Modernization Act, which was 
attended by the Associate Administrator of the SBA for Capital 
Access, Dr. Michael Hager, who provided the administration's 
views on H.R. 3020. In addition, three witnesses were invited 
to speak directly to the impact of the legislation on the 
microloan program. Kristie Darien, the Executive Director of 
the National Association of the Self Employed explained that 
her association is made up of very tiny businesses and their 
main complaint is that they have a very difficult time 
obtaining affordable capital. NASE strongly supports 
modernizing (and reauthorizing) the microloan program. Mr. 
Kevin Kelly of the Association of Enterprise Organizations 
testified that his members fully supported the amendments that 
raised the thresholds to recognize the impact of inflation and 
reduced the barriers for finding qualified intermediaries. 
Finally, Dr. Cordero-Guzman of Baruch College, CUNY, presented 
the highlights of his recent study that found that microlending 
can be a very valuable tool for starting small businesses. He 
also found that such programs are not economically sustainable 
as of yet in the United States without grants or contributions. 
Therefore, the government has a role to play in organizing and 
keeping the program going because of its benefits.

                       V. Committee Consideration

    The Committee on Small Business met in open session on July 
19, 2007 to consider H.R. 3020 and any amendments.

                          VI. Committee Votes

    The bill, H.R. 3020, the Microloan Amendments and 
Modernization Act was marked up by the Committee on Small 
Business on July 19, 2007. The Committee accepted an amendment 
in the nature of a substitute offered by Chairwoman Velazquez 
by voice vote at 10:23 a.m. No further amendments were offered. 
The bill was ordered reported as amended to the House of 
Representatives by a voice vote at 10:25 a.m.

VII. Section-by-Section Analysis of the Small Energy Efficient Business 
                             Act--H.R. 3020


Section 1

    This section entitles the bill the Microloan Amendments and 
Modernization Act and sets out a table of contents.

                       TITLE I--MICROLOAN PROGRAM

Section 101. Transmission of credit scores

    The SBA must facilitate the transmission of credit 
reporting information by establishing a process so that 
intermediaries can provide information about borrowers' payment 
records to major credit reporting agencies. Successful 
borrowers should benefit from their good repayment records and 
thus, through market forces, expand their access to affordable 
capital. However, it is clear that most intermediaries conduct 
too few credit transactions to qualify for such reporting. To 
overcome this, the SBA will need to help the intermediaries in 
the program devise a method of providing and recording such 
records with the credit agencies. Whether this can best be 
accomplished by the SBA aggregating such data for reporting or 
by negotiating agreements for the intermediaries to collect the 
necessary information and report directly with credit agencies 
is left to the discretion of the SBA.

Section 102. Flexible credit

    The words ``short-term'' are removed from description of 
loans in Sec. 7(m) of the Small Business Act. The intermediary 
and the borrower should be able to tailor the appropriate terms 
for the loan that meet the specific needs and sophistication of 
the borrower. Greater flexibility ultimately allows the 
borrower greater control in managing debt obligations and 
possibly enhanced profitability. The federal interest is 
protected because the intermediary is also at risk and 
therefore has a strong interest is agreeing to terms that are 
best for the borrower (to ensure full repayment) and the 
intermediary/lender (who would be the first to absorb any 
loss).

Section 103. Intermediary eligibility requirements

    The eligibility requirements for intermediaries are 
broadened to include consideration of equivalent experience of 
employees in the determination of program eligibility. This 
section adds that an intermediary can qualify for the program 
if it has a full time employee who has 3 years of microlending 
experience and 1 year of providing technical assistance 
including marketing and management. This is an alternative to 
the intermediary organization itself having direct experience, 
the current statutory requirement. The intent of this provision 
is to increase the number of intermediaries that can qualify 
for the program with no reduction in the quality and 
experience. If an aspiring intermediary (generally a non-profit 
organization) has no direct experience in microlending and 
technical assistance then it can hire trained employees with 
considerable, equivalent experience and still qualify.

Section 104. Average loan size

    This section makes changes to three provisions of the 
microloan program increasing the threshold size for certain 
benefits and requirements. It raises the threshold for average 
loan size on loans made by an intermediary from $7,500 to 
$10,000. Under this new threshold, if the intermediary's 
average loan size is below $10,000 it can receive the most 
favorable interest rate available on funds from the federal 
government (2 percent below the 5 year Treasury Bill rate). 
This section also raises the threshold for loans on which 
intermediaries can charge a higher rate up to $10,000 from 
$7,500. These thresholds, which have been frozen at the $7,500 
level for a decade, are being raised to reflect inflation and 
the realities of operating the microloan program.

Section 105. Technical assistance

    Pre-loan.--The bill proposes to increase the amount of 
assistance that micro-intermediaries can provide to would-be 
entrepreneurs using funds from their federal technical 
assistance grants. Oftentimes microentrepreneurs need training, 
financial education and guidance before they can become good 
borrowers and many who are counseled in this way ultimately do 
not apply for or obtain loans. It is important to continue to 
support this pre-loan advice that has a substantial value to 
low-income entrepreneurs. Raising the amount of the grant money 
that can be used for this purpose to 35% will facilitate this 
specialized counseling.
    Third party contract.--Also, this section of the bill 
increases the percentage of the technical assistance grant that 
can be spent on third party contractors that provide 
appropriate counseling and other services. As an integral part 
of starting a business, an entrepreneur may need some 
specialized training, financial education or counseling in 
preparation for receiving a loan. For example, the borrower may 
need the benefit of expertise on licensing requirements or 
local permitting and regulations that a general counselor 
cannot provide. It is intended that up to 35% of the funds from 
the technical assistance grant can be used by the intermediary 
to procure the services of third party contractors to meet the 
specialized needs of the borrower.

Section 106. Entrepreneurs with disabilities

    The word ``disabled'' is added to the list of types of 
entrepreneurs in the Act's ``purposes'' section that the 
microloan intermediaries should try to help. While it is not 
intended to be an exclusive list, it will be beneficial to the 
operation of the program to state specifically that 
intermediaries should give full consideration to disabled loan 
applicants that might benefit from starting a small, 
independent business they can operate themselves. The microloan 
program provides them another important option for their 
financial future. Though the current law does not prohibit such 
consideration, the microloan program can fill a particular need 
in this case and therefore it warrants a specific statutory 
enumeration alongside other deserving categories already 
listed.

     TITLE 2--PROGRAM FOR INVESTMENT IN MICRO-ENTREPRENEURS (PRIME)

    Title 2 removes the PRIME from its current location, 
isolated in the U.S. Code as an adjunct to the Riegle Community 
Development and Regulatory Improvement Act of 1994 (15 U.S.C. 
6901 et seq.), and amends the Small Business Act to include its 
provisions. PRIME has been operated for a decade by the 
Administrator and the SBA as required by law. It is important 
that its provisions be put into the Small Business Act, which 
contains other laws, programs and Congressional directions for 
the SBA, and thus avoid confusion about PRIME's purposes and 
intended beneficiaries. The Committee also believes that the 
move facilitates the oversight of the program by the Committee 
and its review as part of the SBA's regular reauthorization 
process.

            VIII. Congressional Budget Office Cost Estimate

                                                     July 26, 2007.
Hon. Nydia M. Velazquez,
Chairwoman, Committee on Small Business, House of Representatives, 
        Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3020, the 
Microloan Amendments and Modernization Act.
    If you wish further details on this estimate, we will be 
pleased to provide them.
    The CBO staff contact is Susan Willie, who can be reached 
at 226-2860.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3020--Microloan Amendments and Modernization Act

    Summary: H.R. 3020 would reauthorize the Program for 
Investment in Microentrepreneurs (PRIME) under the Small 
Business Act and make several changes to the Small Business 
Administration's (SBA's) microloan program. CBO estimates that 
implementing H.R. 3020 would cost less than $500,000 in 2008 
and $7 million over the 2008-2012 period, assuming 
appropriation of the necessary amounts. Enacting H.R. 3020 
would not affect direct spending or revenues.
    H.R. 3020 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would benefit tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3020 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority \1\........................................       2       0       0       0       0       0
    Estimated Outlays...........................................       1       2       1       0       0       0
Proposed Changes:
    Estimated Authorization Level...............................       0       2       2       2       2       2
    Estimated Outlays...........................................       0       *       1       2       2       2
Spending Under H.R. 3020:
    Estimated Authorization Level \1\...........................       2       2       2       2       2       2
    Estimated Outlays...........................................       1       2       2       2       2      2
----------------------------------------------------------------------------------------------------------------
\1\ The 2007 level is the amount appropriated for technical assistance grants under the PRIME program.
Note.--* = less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the start of fiscal year 2008, the 
necessary amounts will be appropriated for each year, and that 
spending will follow historical patterns.
    The PRIME program provides grants to nonprofit 
organizations to provide technical assistance to low-income 
owners of very small businesses (five employees or less). 
Although no specific amounts are authorized in the bill, CBO 
expects that annual appropriations for the PRIME program would 
continue over the 2008-2012 period equal to the amount 
appropriated in 2007, adjusted for inflation. The Congress 
appropriated $2 million for technical assistance grants under 
the PRIME program in 2007. Assuming appropriation of the 
necessary amounts, CBO estimates that this provision would cost 
less than $500,000 in 2008 and $7 million over the 2008-2012 
period.
    Under current law, nonprofit lending organizations that 
make loans that average $7,500 or less under SBA's microloan 
program are eligible to receive an interest rate reduction of 
75 basis points below the interest rate charged to 
intermediaries making higher value loans.
    H.R. 3020 would increase the maximum loan amount eligible 
for the interest rate reduction to $10,000. Because more loans 
could receive a lower interest rate under the bill, CBO expects 
that this provision would lead to a minor increase in the 
subsidy rate for the microloan program. Because of the small 
volume of such loans, however, we estimate that the increased 
cost of this provision would be less than $500,000 a year.
    Intergovernmental and private-sector impact: H.R. 3020 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The bill would authorize grants to tribal 
governments for microenterprise development. Any costs that 
those entities would incur would result from complying with 
conditions of federal assistance.
    Estimate prepared by: Federal Costs: Susan Willie; Impact 
on State, Local, and Tribal Governments: Elizabeth Cove; Impact 
on the Private Sector: Jacob Kuipers.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    IX. Committee Estimate of Costs

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 2389. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

                         X. Oversight Findings

    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 3020 are incorporated 
into the descriptive portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, clause 18, of the 
Constitution of the United States.

                 XII. Compliance With Public Law 104-4

    H.R. 3020 contains no unfunded mandates.

                 XIII. Congressional Accountability Act

    H.R. 3020 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

               XIV. Federal Advisory Committee Statement

    H.R. 3020 does not establish or authorize the establishment 
of any new advisory committees.

                      XV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 3020 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                 XVI. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3020 includes a number of provisions designed to 
update and to improve the Small Business Administration's 
microloan lending and technical assistance programs which 
specializes in the delivery of such assistance to very small, 
fledgling businesses. It incorporates the existing PRIME 
initiative into the Small Business Act, but makes no changes to 
the program which is also currently operated by the SBA.

      XVII. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SMALL BUSINESS ACT

           *       *       *       *       *       *       *


  Sec. 7.(a) * * *

           *       *       *       *       *       *       *

  (m) Microloan Program.--
          (1)(A) Purposes.--The purposes of the Microloan 
        Program are--
                  (i) to assist women, low-income, veteran 
                (within the meaning of such term under section 
                3(q)), disabled, and minority entrepreneurs and 
                business owners and other individuals 
                possessing the capability to operate successful 
                business concerns;

           *       *       *       *       *       *       *

          (B) Establishment.--There is established a microloan 
        program, under which the Administration may--
                  (i) make direct loans to eligible 
                intermediaries, as provided under paragraph 
                (3), for the purpose of making [short-term,] 
                fixed interest rate microloans to startup, 
                newly established, and growing small business 
                concerns under paragraph (6);

           *       *       *       *       *       *       *

          (2) Eligibility for participation.--An intermediary 
        shall be eligible to receive loans and grants under 
        subparagraphs (B)(i) and (B)(ii) of paragraph (1) if 
        it--
                  (A) meets the definition in [paragraph (10)] 
                paragraph (11); and
                  [(B) has at least 1 year of experience making 
                microloans to startup, newly established, or 
                growing small business concerns and providing, 
                as an integral part of its microloan program, 
                intensive marketing, management, and technical 
                assistance to its borrowers.]
                  (B) has--
                          (i) at least--
                                  (I) 1 year of experience 
                                making microloans to startup, 
                                newly established, or growing 
                                small business concerns; or
                                  (II) 1 full-time employee who 
                                has not less than 3 years 
                                experience making microloans to 
                                startup, newly established, or 
                                growing small business 
                                concerns; and
                          (ii) at least 1 year of experience 
                        providing, as an integral part of its 
                        microloan program, intensive marketing, 
                        management, and technical assistance to 
                        its borrowers.
          (3) Loans to intermediaries.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) Loan duration; interest rates.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Rates applicable to certain 
                        small loans.--Loans made by the 
                        Administration to an intermediary that 
                        makes loans to small business concerns 
                        and entrepreneurs averaging not more 
                        than [$7,500] $10,000, shall bear an 
                        interest rate that is 2 percentage 
                        points below the rate determined by the 
                        Secretary of the Treasury for 
                        obligations of the United States with a 
                        period of maturity of 5 years, adjusted 
                        to the nearest one-eighth of 1 percent.

           *       *       *       *       *       *       *

          (4) Marketing, management and technical assistance 
        grants to intermediaries.--Grants made in accordance 
        with subparagraph (B)(ii) of paragraph (1) shall be 
        subject to the following requirements:
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Assistance to certain small business 
                concerns.--
                          (i) In general.--Each intermediary 
                        may expend an amount not to exceed [25 
                        percent] 35 percent of the grant funds 
                        received under paragraph (1)(B)(ii) to 
                        provide information and technical 
                        assistance to small business concerns 
                        that are prospective borrowers under 
                        this subsection.
                          (ii) Technical assistance.--An 
                        intermediary may expend not more than 
                        [25 percent] 35 percent of the funds 
                        received under paragraph (1)(B)(ii) to 
                        enter into third party contracts for 
                        the provision of technical assistance.

           *       *       *       *       *       *       *

          (6) Loans to small business concerns from eligible 
        intermediaries.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Interest limit.--Notwithstanding any 
                provision of the laws of any State or the 
                constitution of any State pertaining to the 
                rate or amount of interest that may be charged, 
                taken, received, or reserved on a loan, the 
                maximum rate of interest to be charged on a 
                microloan funded under this subsection shall 
                not exceed the rate of interest applicable to a 
                loan made to an intermediary by the 
                Administration--
                          (i) in the case of a loan of more 
                        than [$7,500] $10,000 made by the 
                        intermediary to a small business 
                        concern or entrepreneur by more than 
                        7.75 percentage points; and
                          (ii) in the case of a loan of not 
                        more than [$7,500] $10,000 made by the 
                        intermediary to a small business 
                        concern or entrepreneur by more than 
                        8.5 percentage points.

           *       *       *       *       *       *       *

          (11) Definitions.--For purposes of this subsection--
                  (A) * * *
                  (B) the term ``microloan'' means a [short-
                term,] fixed rate loan of not more than 
                $35,000, made by an intermediary to a startup, 
                newly established, or growing small business 
                concern;

           *       *       *       *       *       *       *

          (14) Credit reporting information.--The Administrator 
        shall establish a process, for use by a lender making a 
        loan to a borrower under this subsection, under which 
        the lender provides to the major credit reporting 
        agencies the information about the borrower that is 
        relevant to credit reporting, such as the payment 
        activity of the borrower on the loan.

           *       *       *       *       *       *       *


SEC. 37. PRIME PROGRAM.

  (a) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Capacity building services.--The term ``capacity 
        building services'' means services provided to an 
        organization that is, or that is in the process of 
        becoming, a microenterprise development organization or 
        program, for the purpose of enhancing its ability to 
        provide training and services to disadvantaged 
        entrepreneurs.
          (2) Disadvantaged entrepreneur.--The term 
        ``disadvantaged entrepreneur'' means a 
        microentrepreneur that is--
                  (A) a very low-income person;
                  (B) a low-income person; or
                  (C) an entrepreneur that lacks adequate 
                access to capital or other resources essential 
                for business success, or is economically 
                disadvantaged, as determined by the 
                Administrator.
          (3) Collaborative.--The term ``collaborative'' means 
        2 or more nonprofit entities that agree to act jointly 
        as a qualified organization under this section.
          (4) Indian tribe.--The term ``Indian tribe'' means 
        any Indian tribe, band, pueblo, nation, or other 
        organized group or community, including any Alaska 
        Native village or regional or village corporation, as 
        defined in or established pursuant to the Alaska Native 
        Claims Settlement Act, which is recognized as eligible 
        for the special programs and services provided by the 
        United States to Indians because of their status as 
        Indians.
          (5) Intermediary.--The term ``intermediary'' means a 
        private, nonprofit entity that seeks to serve 
        microenterprise development organizations and programs 
        as authorized under subsection (d).
          (6) Low-income person.--The term ``low-income 
        person'' means a person having an income, adjusted for 
        family size, of not more than--
                  (A) for metropolitan areas, 80 percent of the 
                area median income; and
                  (B) for nonmetropolitan areas, the greater 
                of--
                          (i) 80 percent of the area median 
                        income; or
                          (ii) 80 percent of the statewide 
                        nonmetropolitan area median income.
          (7) Microentrepreneur.--The term 
        ``microentrepreneur'' means the owner or developer of a 
        microenterprise.
          (8) Microenterprise.--The term ``microenterprise'' 
        means a sole proprietorship, partnership, or 
        corporation that--
                  (A) has fewer than 5 employees; and
                  (B) generally lacks access to conventional 
                loans, equity, or other banking services.
          (9) Microenterprise development organization or 
        program.--The term ``microenterprise development 
        organization or program'' means a nonprofit entity, or 
        a program administered by such an entity, including 
        community development corporations or other nonprofit 
        development organizations and social service 
        organizations, that provides services to disadvantaged 
        entrepreneurs.
          (10) Poverty line.--The term ``poverty line'' means 
        the official poverty line defined by the Office of 
        Management and Budget based on the most recent data 
        available from the Bureau of the Census. The 
        Administrator shall revise annually (or at any shorter 
        interval the Administrator determines to be feasible 
        and desirable) the poverty line. The required revision 
        shall be accomplished by multiplying the official 
        poverty line by the percentage change in the Consumer 
        Price Index for All Urban Consumers during the annual 
        or other interval immediately preceding the time at 
        which the revision is made.
          (11) Training and technical assistance.--The term 
        ``training and technical assistance'' means services 
        and support provided to disadvantaged entrepreneurs, 
        such as assistance for the purpose of enhancing 
        business planning, marketing, management, financial 
        management skills, and assistance for the purpose of 
        accessing financial services.
          (12) Very low-income person.--The term ``very low-
        income person'' means having an income, adjusted for 
        family size, of not more than 150 percent of the 
        poverty line.
  (b) Establishment of Program.--The Administrator shall 
establish a microenterprise technical assistance and capacity 
building grant program to provide assistance from the 
Administration in the form of grants to qualified organizations 
in accordance with this section.
  (c) Uses of Assistance.--A qualified organization shall use 
grants made under this section--
          (1) to provide training and technical assistance to 
        disadvantaged entrepreneurs;
          (2) to provide training and capacity building 
        services to microenterprise development organizations 
        and programs and groups of such organizations to assist 
        such organizations and programs in developing 
        microenterprise training and services;
          (3) to aid in researching and developing the best 
        practices in the field of microenterprise and technical 
        assistance programs for disadvantaged entrepreneurs; 
        and
          (4) for such other activities as the Administrator 
        determines are consistent with the purposes of this 
        section.
  (d) Qualified Organizations.--For purposes of eligibility for 
assistance under this section, a qualified organization shall 
be--
          (1) a nonprofit microenterprise development 
        organization or program (or a group or collaborative 
        thereof) that has a demonstrated record of delivering 
        microenterprise services to disadvantaged 
        entrepreneurs;
          (2) an intermediary;
          (3) a microenterprise development organization or 
        program that is accountable to a local community, 
        working in conjunction with a State or local government 
        or Indian tribe; or
          (4) an Indian tribe acting on its own, if the Indian 
        tribe can certify that no private organization or 
        program referred to in this paragraph exists within its 
        jurisdiction.
  (e) Allocation of Assistance; Subgrants.--
          (1) Allocation of assistance.--
                  (A) In general.--The Administrator shall 
                allocate assistance from the Administration 
                under this section to ensure that--
                          (i) activities described in 
                        subsection (c)(1) are funded using not 
                        less than 75 percent of amounts made 
                        available for such assistance; and
                          (ii) activities described in 
                        subsection (c)(2) are funded using not 
                        less than 15 percent of amounts made 
                        available for such assistance.
                  (B) Limit on individual assistance.--No 
                single person may receive more than 10 percent 
                of the total funds appropriated under this 
                section in a single fiscal year.
          (2) Targeted assistance.--The Administrator shall 
        ensure that not less than 50 percent of the grants made 
        under this section are used to benefit very low-income 
        persons, including those residing on Indian 
        reservations.
          (3) Subgrants authorized.--
                  (A) In general.--A qualified organization 
                receiving assistance under this section may 
                provide grants using that assistance to 
                qualified small and emerging microenterprise 
                organizations and programs, subject to such 
                rules and regulations as the Administrator 
                determines to be appropriate.
                  (B) Limit on administrative expenses.--Not 
                more than 7.5 percent of assistance received by 
                a qualified organization under this section may 
                be used for administrative expenses in 
                connection with the making of subgrants under 
                subparagraph (A).
          (4) Diversity.--In making grants under this section, 
        the Administrator shall ensure that grant recipients 
        include both large and small microenterprise 
        organizations, serving urban, rural, and Indian tribal 
        communities serving diverse populations.
          (5) Prohibition on preferential consideration of 
        certain sba program participants.--In making grants 
        under this section, the Administrator shall ensure that 
        any application made by a qualified organization that 
        is a participant in the program established under 
        section 7(m) does not receive preferential 
        consideration over applications from other qualified 
        organizations that are not participants in such 
        program.
  (f) Matching Requirements.--
          (1) In general.--Financial assistance under this 
        section shall be matched with funds from sources other 
        than the Federal Government on the basis of not less 
        than 50 percent of each dollar provided by the 
        Administration.
          (2) Sources of matching funds.--Fees, grants, gifts, 
        funds from loan sources, and in-kind resources of a 
        grant recipient from public or private sources may be 
        used to comply with the matching requirement in 
        paragraph (1).
          (3) Exception.--
                  (A) In general.--In the case of an applicant 
                for assistance under this section with severe 
                constraints on available sources of matching 
                funds, the Administrator may reduce or 
                eliminate the matching requirement in paragraph 
                (1).
                  (B) Limitation.--Not more than 10 percent of 
                the total funds made available from the 
                Administration in any fiscal year to carry out 
                this section may be excepted from the matching 
                requirement in paragraph (1), as authorized by 
                subparagraph (A).
  (g) Applications for Assistance.--An application for 
assistance under this section shall be submitted in such form 
and in accordance with such procedures as the Administrator 
shall establish.
  (h) Recordkeeping.--
          (1) In general.--A qualified organization receiving 
        assistance from the Administration under this section 
        shall keep such records, for such periods as may be 
        prescribed by the Administrator and necessary to 
        disclose the manner in which any assistance under this 
        section is used and to demonstrate compliance with the 
        requirements of this section.
          (2) User profile information.--The Administrator 
        shall require each qualified organization receiving 
        assistance from the Administration under this section 
        to compile such data, as is determined to be 
        appropriate by the Administrator, on the gender, race, 
        ethnicity, national origin, or other pertinent 
        information concerning individuals that utilize the 
        services of the assisted organization to ensure that 
        targeted populations and low-income residents of 
        investment areas are adequately served.
          (3) Access to records.--The Administrator shall have 
        access on demand, for the purpose of determining 
        compliance with this section, to any records of a 
        qualified organization that receives assistance from 
        the Administration under this section.
          (4) Review.--Not less than annually, the 
        Administrator shall review the progress of each 
        assisted organization in carrying out its strategic 
        plan, meeting its performance goals, and satisfying the 
        terms and conditions of its assistance agreement.
          (5) Reporting.--
                  (A) Annual reports.--The Administrator shall 
                require each qualified organization receiving 
                assistance from the Administration under this 
                section to submit an annual report to the 
                Administrator on its activities, its financial 
                condition, and its success in meeting 
                performance goals, in satisfying the terms and 
                conditions of its assistance agreement, and in 
                complying with other requirements of this 
                section, in such form and manner as the 
                Administrator shall specify.
                  (B) Availability of reports.--The 
                Administrator, after deleting or redacting any 
                material as appropriate to protect privacy or 
                proprietary interests, shall make such reports 
                submitted under subparagraph (A) available for 
                public inspection.
  (i) Implementation.--The Administrator shall, by regulation, 
establish such requirements as may be necessary to carry out 
this section.
  Sec. [37] 99. All laws and parts of laws inconsistent with 
this Act are hereby repealed to the extent of such 
inconsistency.
                              ----------                              


     SUBTITLE C OF TITLE I OF THE RIEGLE COMMUNITY DEVELOPMENT AND 
                   REGULATORY IMPROVEMENT ACT OF 1994

[Subtitle C--Microenterprise Technical Assistance and Capacity Building 
                                Program

[SEC. 171. SHORT TITLE.

  [This subtitle may be cited as the ``Program for Investment 
in Microentrepreneurs Act of 1999'', also referred to as the 
``PRIME Act''.

[SEC. 172. DEFINITIONS.

  [For purposes of this subtitle, the following definitions 
shall apply:
          [(1) Administration.--The term ``Administration'' 
        means the Small Business Administration.
          [(2) Administrator.--The term ``Administrator'' means 
        the Administrator of the Small Business Administration.
          [(3) Capacity building services.--The term ``capacity 
        building services'' means services provided to an 
        organization that is, or that is in the process of 
        becoming, a microenterprise development organization or 
        program, for the purpose of enhancing its ability to 
        provide training and services to disadvantaged 
        entrepreneurs.
          [(4) Collaborative.--The term ``collaborative'' means 
        2 or more nonprofit entities that agree to act jointly 
        as a qualified organization under this subtitle.
          [(5) Disadvantaged entrepreneur.--The term 
        ``disadvantaged entrepreneur'' means a 
        microentrepreneur that is--
                  [(A) a low-income person;
                  [(B) a very low-income person; or
                  [(C) an entrepreneur that lacks adequate 
                access to capital or other resources essential 
                for business success, or is economically 
                disadvantaged, as determined by the 
                Administrator.
          [(6) Indian tribe.--The term ``Indian tribe'' has the 
        meaning given the term in section 103.
          [(7) Intermediary.--The term ``intermediary'' means a 
        private, nonprofit entity that seeks to serve 
        microenterprise development organizations and programs 
        as authorized under section 175.
          [(8) Low-income person.--The term ``low-income 
        person'' has the meaning given the term in section 103.
          [(9) Microentrepreneur.--The term 
        ``microentrepreneur'' means the owner or developer of a 
        microenterprise.
          [(10) Microenterprise.--The term ``microenterprise'' 
        means a sole proprietorship, partnership, or 
        corporation that--
                  [(A) has fewer than 5 employees; and
                  [(B) generally lacks access to conventional 
                loans, equity, or other banking services.
          [(11) Microenterprise development organization or 
        program.--The term ``microenterprise development 
        organization or program'' means a nonprofit entity, or 
        a program administered by such an entity, including 
        community development corporations or other nonprofit 
        development organizations and social service 
        organizations, that provides services to disadvantaged 
        entrepreneurs.
          [(12) Training and technical assistance.--The term 
        ``training and technical assistance'' means services 
        and support provided to disadvantaged entrepreneurs, 
        such as assistance for the purpose of enhancing 
        business planning, marketing, management, financial 
        management skills, and assistance for the purpose of 
        accessing financial services.
          [(13) Very low-income person.--The term ``very low-
        income person'' means having an income, adjusted for 
        family size, of not more than 150 percent of the 
        poverty line (as defined in section 673(2) of the 
        Community Services Block Grant Act (42 U.S.C. 9902(2)), 
        including any revision required by that section).

[SEC. 173. ESTABLISHMENT OF PROGRAM.

  [The Administrator shall establish a microenterprise 
technical assistance and capacity building grant program to 
provide assistance from the Administration in the form of 
grants to qualified organizations in accordance with this 
subtitle.

[SEC. 174. USES OF ASSISTANCE.

  [A qualified organization shall use grants made under this 
subtitle--
          [(1) to provide training and technical assistance to 
        disadvantaged entrepreneurs;
          [(2) to provide training and capacity building 
        services to microenterprise development organizations 
        and programs and groups of such organizations to assist 
        such organizations and programs in developing 
        microenterprise training and services;
          [(3) to aid in researching and developing the best 
        practices in the field of microenterprise and technical 
        assistance programs for disadvantaged entrepreneurs; 
        and
          [(4) for such other activities as the Administrator 
        determines are consistent with the purposes of this 
        subtitle.

[SEC. 175. QUALIFIED ORGANIZATIONS.

  [For purposes of eligibility for assistance under this 
subtitle, a qualified organization shall be--
          [(1) a nonprofit microenterprise development 
        organization or program (or a group or collaborative 
        thereof) that has a demonstrated record of delivering 
        microenterprise services to disadvantaged 
        entrepreneurs;
          [(2) an intermediary;
          [(3) a microenterprise development organization or 
        program that is accountable to a local community, 
        working in conjunction with a State or local government 
        or Indian tribe; or
          [(4) an Indian tribe acting on its own, if the Indian 
        tribe can certify that no private organization or 
        program referred to in this paragraph exists within its 
        jurisdiction.

[SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.

  [(a) Allocation of Assistance.--
          [(1) In general.--The Administrator shall allocate 
        assistance from the Administration under this subtitle 
        to ensure that--
                  [(A) activities described in section 174(1) 
                are funded using not less than 75 percent of 
                amounts made available for such assistance; and
                  [(B) activities described in section 174(2) 
                are funded using not less than 15 percent of 
                amounts made available for such assistance.
          [(2) Limit on individual assistance.--No single 
        person may receive more than 10 percent of the total 
        funds appropriated under this subtitle in a single 
        fiscal year.
  [(b) Targeted Assistance.--The Administrator shall ensure 
that not less than 50 percent of the grants made under this 
subtitle are used to benefit very low-income persons, including 
those residing on Indian reservations.
  [(c) Subgrants Authorized.--
          [(1) In general.--A qualified organization receiving 
        assistance under this subtitle may provide grants using 
        that assistance to qualified small and emerging 
        microenterprise organizations and programs, subject to 
        such rules and regulations as the Administrator 
        determines to be appropriate.
          [(2) Limit on administrative expenses.--Not more than 
        7.5 percent of assistance received by a qualified 
        organization under this subtitle may be used for 
        administrative expenses in connection with the making 
        of subgrants under paragraph (1).
  [(d) Diversity.--In making grants under this subtitle, the 
Administrator shall ensure that grant recipients include both 
large and small microenterprise organizations, serving urban, 
rural, and Indian tribal communities serving diverse 
populations.
  [(e) Prohibition on Preferential Consideration of Certain SBA 
Program Participants.--In making grants under this subtitle, 
the Administrator shall ensure that any application made by a 
qualified organization that is a participant in the program 
established under section 7(m) of the Small Business Act does 
not receive preferential consideration over applications from 
other qualified organizations that are not participants in such 
program.

[SEC. 177. MATCHING REQUIREMENTS.

  [(a) In General.--Financial assistance under this subtitle 
shall be matched with funds from sources other than the Federal 
Government on the basis of not less than 50 percent of each 
dollar provided by the Administration.
  [(b) Sources of Matching Funds.--Fees, grants, gifts, funds 
from loan sources, and in-kind resources of a grant recipient 
from public or private sources may be used to comply with the 
matching requirement in subsection (a).
  [(c) Exception.--
          [(1) In general.--In the case of an applicant for 
        assistance under this subtitle with severe constraints 
        on available sources of matching funds, the 
        Administrator may reduce or eliminate the matching 
        requirements of subsection (a).
          [(2) Limitation.--Not more than 10 percent of the 
        total funds made available from the Administration in 
        any fiscal year to carry out this subtitle may be 
        excepted from the matching requirements of subsection 
        (a), as authorized by paragraph (1) of this subsection.

[SEC. 178. APPLICATIONS FOR ASSISTANCE.

  [An application for assistance under this subtitle shall be 
submitted in such form and in accordance with such procedures 
as the Administrator shall establish.

[SEC. 179. RECORDKEEPING.

  [The requirements of section 115 shall apply to a qualified 
organization receiving assistance from the Administration under 
this subtitle as if it were a community development financial 
institution receiving assistance from the Fund under subtitle 
A.

[SEC. 180. AUTHORIZATION.

  [In addition to funds otherwise authorized to be appropriated 
to the Fund to carry out this title, there are authorized to be 
appropriated to the Administrator to carry out this subtitle--
          [(1) $15,000,000 for fiscal year 2000;
          [(2) $15,000,000 for fiscal year 2001;
          [(3) $15,000,000 for fiscal year 2002; and
          [(4) $15,000,000 for fiscal year 2003.

[SEC. 181. IMPLEMENTATION.

  [The Administrator shall, by regulation, establish such 
requirements as may be necessary to carry out this subtitle.]